Final Regulations for Catch-Up Contributions

Abstract

In July 2003, the IRS issued final regulations on catch-up contributions that adopt the general approach and methodology of the proposed regulations with a few modifications. The final regulations retain the universal availability requirement but provide two new exceptions. First, an eligible plan can exclude from catch-up contributions employees covered by a collective bargaining agreement that contains retirement provisions. Second, an eligible plan has a longer transition period to comply with the universal availability requirement after a corporate acquisition or disposition. In addition to creating some exceptions, the final regulations provide greater clarity on a number of points. The final regulations allow pro rata limits on catch-up contributions on a per payroll basis. Finally, the regulations clarify how catch-up contributions and other statutory limits interact in non-calendar year plans. The final regulations are applicable to catch-up contributions made in tax years on or after January 1, 2004.